Restaurant Franchises

Fast Food Franchises under Fire

June 13, 2014

Quick service restaurants make up one of the largest pieces of the franchise business opportunity pie. Or cupcake, cookie pizza, burger, or dish of your choice.

The appeal from a business point of view is obvious. Some 160,000 fast food restaurants serve 50,000,000 customer a day, to the tine of about $100 billion each year. 78% of Americans report that they eat fast food at least once every week, and 6% of us eat fast food every day. Clearly, there is an enormous market for quick, tasty food, and since food is the essence of consumable, Americans always need more.

Fast food is facing some challenges right now, though. First, there is a growing perception that fast food is unhealthy. Much fast food is high in calories, salt, and fat, and fresh fruits and vegetables, while they are now available at most fast food restaurants, are not strongly associated with fast food in people’s minds. Whether fast food is really less healthy than the food people would replace it with at home is uncertain, but many Americans compare it in their minds with wholesome grilled fish and vegetables that they imagine they might eat.

Fast food restaurants are also on the front lines in the current debate over minimum wage. Actually, there are many other jobs that are as likely to earn minimum wage, including child care providers, home health care providers, maintenance and janitorial workers, and retail clerks, but fast food has taken center stage in the debate in the media. This may be in part because more Americans have direct contact with fast food workers than with buildings and grounds maintenance personnel, but the result has been a flurry of bad press for corporations in this space.

Fast food restaurants also tend to have a lower profit margin than some other types of franchises. When you compare the volume of consumers served by a sandwich shop with the number served by a company that remodels kitchens, you can see that the volume makes a difference for revenue. However, the lower margins have in some cases been emphasized when franchisees respond to concerns about wages. Once again, this is what shows up in the press.

Should these concerns keep you from choosing a fast food restaurant for your franchise business investment?

Consider these points before you get worried:

Franchise restaurants face fewer of the challenges that cause independent businesses to fail at such a high rate. Sourcing ingredients, knowing how much of each ingredient to keep on hand, fine-tuning menus and recipes to appeal to consumers, developing systems for staff — franchisors have already figured these things out. Following a proven system makes a franchise more manageable.

One of the most crucial factors for restaurant success is the location. Franchisees typically get support not only in identifying the best location, but also in building out their restaurant to suit the chosen location.

One of the great advantages of fast food is the consistent look and taste. People don’t just crave a pizza — they crave an NYPD pizza. Travelers appreciate the familiar when they drive through your town, and newcomers don’t need time to warm up to your brand. The national name recognition gives a franchise restaurant a tremendous step up compared with a new independent restaurant.

The last thing to consider is the fact that the media firestorms haven’t stopped Americans from eating at fast food franchise restaurants. There are so many options among restaurant franchises that you can be sure of finding the perfect restaurant franchise for you.